When Russia announced a moratorium on its debt payments and a rouble devaluation, Latin American debt traders had only one thing to say: "The markets are closed."
Venezuela's $100 million 20-year issue came to market in July and is likely to be the last Latin sovereign issue for at least four to six months, say bankers. "Every single deal is being pulled," says one. "They are on hold indefinitely."
The question is how long Latin American sovereigns, not to mention the lesser-quality corporates, can survive without tapping the international capital markets. "The outlook for the rest of the year is not pretty," says Matthew Duda, senior emerging markets strategist at CSFB.
Venezuela still needs another $1.5 billion to pay off maturing corporate and sovereign bonds during the rest of 1998 and $2 billion in 1999, reckons CSFB. It was already widely considered the weakest of the Latin governments and its credit outlook was lowered to "poor" in early September by Standard & Poor's and downgraded a notch to B2 by Moody's Investors Service. "They are now doing asset shuffling between government departments," says one banker. "That will hold them through November and December, but they will be pressed if markets keep them out much beyond that."